Eminent Domain Report

It is pretty common, at least in California, for a business being displaced by an eminent domain proceeding to seek compensation for loss of business goodwill.  But what happens when the "business" is a non-profit organization?

In Cathedral City, the city has plans to acquire a property on which a longstanding thrift store sits.  An August 17 article by Colin Atagi in The Desert Sun, Cathedral City plans may push Angel View move, opens:

A Cathedral City thrift store that's older than the community itself may relocate if the city acquires the property through eminent domain.

While the parties do not appear to be too far away on the price of the real estate, the Angel View Thrift Mart that operates on the property is concerned about finding a location that will allow it to maintain the level of sales - and donations - they receive at their current location. 

While it sounds like both parties want to find an amicable resolution, the facts do raise an interesting legal issue.  If the parties cannot reach a deal, and if the city condemns the thrift store property, forcing its relocation (or, if no relocation site can be found, closure), can the store - which, by definition, has no profits - make a claim for lost business goodwill?

Without addressing whether the thrift store involved has a viable claim (I know nothing about the situation other than what I've read in the August 17 article), the short answer is yes.  A non-profit can maintain a claim for loss of business goodwill. 

While profits and goodwill often go hand in hand, California's business goodwill statute, Code of Civil Procedure section 1263.510, actually makes no mention of the word "profit."  Rather, California defines goodwill as:

the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.

Thus, even though a non-profit can never have profit, this does not preclude recovery for lost business goodwill.  This does not mean that all charitable organizations possess goodwill, or that they will lose goodwill if forced to relocate, but it is possible.  In fact, we've handled cases in the past for churches in which we established that the church possessed goodwill. 

CAVEAT:  While I am confident that the above analysis is correct, I am not aware of any reported California eminent domain opinion squarely holding that a non-profit can recover lost business goodwill.  (I'm also not aware of a published opinion holding that they cannot.)